Condominium Boards: Reviewing Your By-Laws is Vital to Running Your Condominium Effectively

Condominiums have registered by-law(s) setting out important corporate governance matters, including:

  1. Directors and officers: elections and appointment, qualifications, length of terms of office, the number of directors and officers, etc.
  2. Board meetings: quorum, voting, etc.
  3. Borrowing money for the corporation
  4. Assessing and collecting common expenses
  5. Standard unit definitions and insurance deductible responsibilities
  6. Maintenance and management of the property and corporation’s assets

and the list goes on.

But does the Board of Directors truly need to read these by-laws? YES!

By-laws are not documents of legal jargon that can be filed away – by-laws contain important information with an ongoing impact on the condominium. The by-laws must be followed in order to run the condominium effectively.

For example, how many directors are you required to have on your Board at any given time? If your by-law requires at least 5 directors, but you only have2, then your Board has not met its quorum requirements and cannot properly carry out Board business.

Understanding your by-laws is also important when sending information to owners, such as a Notice of Meeting. If you are electing directors at your next Annual General Meeting, you should always review your by-laws before stating in the Notice of Meeting the number of director positions up for election and the length of the terms of each director position. The by-laws may also prohibit nominations from the floor, which the owners should be told of in advance of the meeting.

During the COVID-19 pandemic, many condominiums have started holding electronic meetings, which may include electronic voting. As condominiums have been forced to adopt electronic methods, they are realizing these new methods can be highly effective and would like to continue in this manner after the pandemic ends.

Before passing a new by-law to permit electronic meetings and voting, we recommend reviewing your current by-law(s) to see if electronic meetings and voting are already permitted, and to ensure compliance with the by-law’s terms. If your current by-law(s) do not meet your condominium’s needs, they can be amended.

If reviewing your by-laws seems like a daunting task, we would be happy to assist you to ensure your condominium is operating as effectively, efficiently, and happily as possible.

Condo By-laws: What’s the Deal with Voting?

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Photo by Ketut Subiyanto on Pexels.com

With many condominiums passing by-laws to allow for virtual meetings and electronic voting, one of the most frequently asked questions right now is: how many owners need to approve the by-law? This became a common question after the Condominium Act, 1998, was amended in 2017 to create two different voting thresholds for by-laws. Prior to the amendments there was only one answer: a majority of the units in the corporation. (*Excluding units used for parking, storage, or services/facilities/mechanical installations unless all units are used for these purposes). There are now two answers: a majority of the units in the corporation or a majority of units represented at the meeting.

Confusion increased in 2019 when a court applied the wrong voting threshold to a borrowing by-law. We previously wrote about the case here: https://ontcondolaw.com/2019/05/01/the-controversiality-of-the-voting-threshold-borrowing-by-laws/

What is the level of support required to pass a by-law?

Most by-laws still require a majority of the units in the corporation to approve them at an owners’ meeting. This list includes:

  • Directors: the number, qualifications/disqualifications, elections, removal, term of office, and the regulation of board meetings
  • Borrowing: to authorize the condominium borrowing money to carry out its duties
  • Standard Unit: to define the standard unit for each class of unit for the purposes of determining obligations for insurance and repair after damage of improvements
  • Deductible: to shift responsibility for deductibles under the condominium’s insurance policies to owners in certain circumstances
  • Property: to lease a part of the common elements, grant or transfer an easement or licence through the common elements, or release an easement that is part of the common elements.

The by-laws that may be approved by the lower threshold, majority of the units represented at the meeting, are by-laws about requirements that were created by the amendments in 2017, such as:

  • Candidate Disclosures: Adding candidate disclosure requirements for elections to the board or requiring them to be in writing or provided within a certain time period
  • Information Certificates: Adding required content or increasing the frequency of them
  • Meetings: Adding material for meetings and notices of meetings, permitting virtual meetings and electronic or telephonic voting, and permitting a portion of the proxy or ballot identifying the unit or owner to be disclosed in record requests
  • Records: defining additional core records and other records the condominium is required to maintain, and setting retention periods for the additional records.

The lists above are not exhaustive.

Process for Making, Amending or Repealing By-laws

The process for having owners approve by-laws is the same for all by-laws, except for the voting thresholds described above. The board of directors must, by resolution, approve the by-law at a board meeting. The condominium must then call a meeting of owners to present the by-law to the owners. The preliminary notice of meeting must indicate that proposed changes to the by-laws will be presented at the meeting and the notice of meeting must include a copy of the proposed by-law. At the meeting, voting is typically conducted by recorded vote (ballot) and proxies casting votes. If approved by the required number of units, the by-law certificate must be signed by the board and sent to the lawyer for registration. The by-law is not effective until registered on title. Once registered, the by-law must be included in status certificates.

The Controversiality of the Voting Threshold: Borrowing By-laws

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Earlier this week, we blogged about the considerations and processes involved when a condominium determines there is a need for borrowing from a lender, inclusive of the requirement for a borrowing by-law. In this post, we discuss a recent case related to the passage of borrowing by-laws, which has created some controversy within the condominium industry.

LaFramboise v. York Condominium Corp. No. 365, 2019 CarswellOnt 680, dealt with a motion brought by an appointed administrator on behalf of a condominium corporation, seeking direction from the court as to whether a borrowing by-law had been passed at an owners’ meeting. Although there was little information provided on the particular circumstances that led to this application, it appears that some unit owners may have questioned the validity of a borrowing by-law that was passed at an owners’ meeting, resulting in the motion for direction to be filed by the condominium corporation’s administrator.

Based upon an interpretation of sections 50 and 53 of the Condominium Act, 1998 (“Act”), the Court appears to suggest that so long as a majority of all unit owners within a condominium are present at an owners’ meeting called to consider a borrowing by-law, a borrowing by-law can be successfully passed with the support of a majority of all unit owners present at the meeting rather than a majority of all units within the corporation.

Respectfully, the conclusions drawn from the interpretation of the Act in this case are contrary to the Act; specifically, section 56(10) of the Act.

56(10) of the Act unambiguously states that a by-law is not effective until:

“(a) the owners of a majority of the units in the corporation, or such other number of owners that is prescribed, vote in favour of confirming it, with or without amendment…”

Unless a lower voting threshold is prescribed in the regulations, section 56(10) of the Act makes it clear that a majority of the units in the corporation must vote in favour of a proposed by-law in order for it to pass, rather than the majority of units present at the meeting.

An often overlooked section of the regulations provides additional support for our position. Section 1.1(1) states that a reference to the portion of units in a corporation in the Act or regulations shall be interpreted as a reference to a portion of: a) owner-occupied units; b) units that are not s.49(3) units (i.e. parking, storage, facilities or mechanical installations); or c) all units in the corporation if all units are s.49(3) units and clause (a) does not apply. Subsection (2) specifically states that subsection 1.1(1) applies to section 56(10)(a) of the Act. Accordingly, subsection 56(10) requires a majority of units in the corporation that are not s.49(3) units unless all of the units are those type of units.

As noted above, the regulations do outline various by-laws that can be passed by a majority of the units present at a meeting rather than a majority of all units in a corporation; however, you will note that a borrowing by-law is not one of the prescribed by-laws that may be passed with the support of a majority of units present at a meeting [see section 14(2) of O. Reg. 48/01].

Below you will find a chart prepared by our firm which summarizes the by-laws that can be passed by a majority of units present at a meeting, pursuant to the regulations:

bylaws

Based upon the clear language in section 56(10) of the Act and the regulations, we cannot agree that a by-law can be passed with the support of a majority of those units present at an owners’ meeting called for that purpose (unless the regulations specifically permit for a lower voting threshold). Rather, in order for a by-law to pass, a majority of all units within the corporation must vote in favour of it.

Accordingly, despite the existence of this case, it would be prudent for condominium corporations to continue to receive the support of a majority of all units within the corporation when attempting to pass a by-law, unless the regulations clearly prescribe a lower voting threshold for that type of by-law.